Market Trends: Deep Dive into Biotech Setups

Welcome back to Trading Trends, where we talk with traders and investment professionals to provide you insight as to what's actually happening in these markets. Mark Likenfeld from the Oxford Group is back and he has brought receipts with him. The last time that we spoke with Mark, uh we talked about process. How do you find setups inside of a messy tape? And today we find ourselves looking at some charts where there's actually been some movement from the last time that we discussed these things with Mark. So this is the right place to begin. We have Madna, we have Merc, we have Natera, we have climb, we have a few stocks in the healthc care sector which really has been overlooked until recently. Madna just had their big cancer vaccine announcement using the Kit Truda Merc drug for example stock price soared went well beyond the expected move uh doubling and then some overnight. But that brings us to this conversation here because how do you find a chart like Madna or maybe even a smaller cap biotech stock that you could take a fly on? Mark Lectinfeld from the Oxford Group is here. Thanks for coming back to Tasty Lives Trading Trends. >> My pleasure. Thanks for having me. >> So, last time we spoke the focus was process, right? Find the setup to find the level, take the trade, manage it without getting emotional. Um, on the Mercer charts, you had marked both the buy and the sale. That's really useful, I think, for traders who are trying to learn this out because it turns that conversation from theory into actual practice. So, can you walk us through your decision-making here? What did you see at the buy point? What made you sell? And how do you judge whether that was good execution even after the stock kept moving? >> Sure. So on both of those positions, you know, the stock had broken above important resistance levels and basically I just waited for it to come back down a little bit. Um, you know, sometimes we'll buy a stock as it's breaking out if the volume is strong. sometimes, you know, we miss it and so we have to wait a little bit for it to come back in and that's what we did both with Merc and Natara and especially Natara because that had had did come uh you know back down significantly. We did miss that one on the initial breakout but uh you know the market often gives you good opportunities. Stocks don't always go straight up. So there are those opportunities to get back in when it comes lower. And then I'm just using that resistance as that previous resistance as support to get back in. Uh and that's simply what we did uh with both of those positions and in sectors that we were also bullish on at that time too. So you know we're doing a lot of sector work as well. It's not simply finding every stock that's breaking out. It's it's finding stocks that are doing that but in sectors that have some momentum to them as well. >> You know, Merk's a really interesting chart because you show the buy area around the breakout area, the sale into the surge, and then the stock still holding the highs afterwards. I know one of those emotions that I had a long time difficulty getting over was this feeling that I left money on the table still, right? So, when you look at Merc now, do you see that sale as discipline or is a stock still acting well enough to maybe revisit from your point of view? Um, I I don't see anything on the chart right now that has me excited. You know, in hindsight, yes, I could have held on a little bit longer, but you know, Merc is a giant pharma company. You know, this is not a small biotech company that is likely to go on a on a huge run on strong news. You know, after after a big pop in a big stock like that, I'm usually happy to take my profits and move on, especially when it is a short-term trade. You know, it's it's funny that you mentioned the big pop possibility here because when you look at a company like Nvidia, it's printing hundreds of billions of dollars, but it's also a multi- trillion mega cap company already. So, where's the upside? How much more can it go? Uh, I recall going through the CFA Institute education all those years ago when I was working towards the charter that they point out that because there's so much less analyst coverage of smaller midcap stocks, that's where there's actually a little bit more alpha perhaps if you're a skilled stock picker. Do you find that to be the case in your own experience? Is that why you look at some of these smaller cap biotech names? >> Sure, absolutely. I mean, some of these smaller names can really go on enormous runs. Uh, but you know, there there's risk with that as well. You know, especially when clinical trial data comes out, you know, you're not talking about a semiconductor company or a small cap retailer. There's these these clinical trial data readouts can be very binary uh, you know, catalysts for the stock. They can go on tremendous runs or they can be cut in half based on the news in one day. So you when you're when you're trading these stocks, you definitely need to be position sizing accordingly, being able to handle that risk. And whereas with a regular stock, perhaps you have a, you know, 5% or 10% stop loss on any trade. But with some of these small cap bios, you really need to have much wider ranges because, you know, if you're if you're planning on getting out with a, let's say, a 5% loss, if things go wrong and the stock opens up, you know, 40% lower, uh, that's going to be quite painful. So, you do need to go in with your eyes wide open on these smaller bios. >> Speaking of the smaller bios, you mentioned one here. climb bio had a pretty clean technical structure but we have a pullback that maybe is testing whether prior's support or resistance becomes support I should say. Um >> yeah and just perfect example they had clinical uh trial data uh this morning uh readout uh phase one data so it's early but uh the market apparently you know is not uh is not too enamored with this data. So, the stock did sell off this morning. It it broke that initial support uh where we had bought it just above that straight line, but now it's uh it's, you know, we've got this beautiful trend line that goes back eight months and the Ichimoku cloud, which is not something I use on every single chart, but when it works, it really works quite well. And that's another area of support. So, you've got the the trend line and the cloud as as kind of this double level of support. So, I'm going to give it a little bit more time, see if that support holds and if the stock can, you know, rally from there. Um, but right now, you know, today's news wasn't great, but I love this this massive support that goes back eight months. So, that's that's pretty significant. And if that breaks, that tell you tells you that, you know, the picture has really changed. >> So, it's kind of like a mirror image of what happened with Madna, right? Um, these names are repricing violently on these trial data numbers, the partnership news, regulatory events, platform validation like we saw with the Merc uh Merc Madna combination on their Katruda MRNA platform. So how do how do you approach biotech after you get these huge catalyst moves right now? Do you wait for a base? Do you automatically buy strength? Do you look to sell premium after a rerating? >> You know, every every situation is different. So you know the Merc uh and Madna trades, you know, I was in MC before the news and then got into Madna after. So, you know, we took our profits in Merc when the stock popped and and remember, you know, these two stocks popped together because the their drugs were combined on this clinical trial for melanoma. So, uh after Madna popped, then it consolidated a little bit and you see I I drew this uh this little bull flag and once it emerged from the bull flag, to me that was a sign that the stock was going to continue higher and we grabbed it there. Now, after shortly after that, they did a a convertible bond raise, so the stock came in a little bit. There was some natural profit taking uh and then it it started to rebound again. This morning, it's down a little bit on a downgrade. I'm not too worried about that. Uh but, you know, every every situation can be a little different. Whereas, as this one, it to me, this chart pattern, which a bull flag is is one of my favorite chart patterns, especially when it's, you know, a breakout on nice volume. Uh to me that suggests that this stock has more room to run and you know Madna is also one of those stocks that you know there's a there's a story behind it and when people get excited about especially biotech stocks but really any kind of story stock they can really run higher. So breaking out of a a very bullish pattern like a bull flag is something that's going to capture my attention. >> I like the phrase that you just used story stock there. I I the one of the terms I use is narrative flexibility, right? When something has narrative flexibility, no matter really what happens, it's seen as a positive. >> Uh sure. What are some of the story stocks that you're watching right now? And what defines a good story in biotech these days? >> Uh that's a great question. So in biotech um you know certainly anything cancer related is always is always going to capture people's attention if the data is good and and particularly madna and merc it was it was very good for melanoma aggressive melanoma which is a very difficult to treat cancer uh rare diseases are very popular because they popular for investors because they uh they can charge enormous sums for these these drugs. I mean, we're talking hundreds of thousands of dollars for certain drugs. Um, so anything like that where you're meeting either an unmet need or something that that's really kind of revolutionary in a particular uh disease uh really captures people's attention in biotech. And then you know outside of biotech you know just looking at Nvidia I mean and as you mentioned it's a multi-t trillion dollar company but it is still very much a story stock. It still captures everyone's attention no matter what it does. Uh because there you know their technology really is changing the world. So I always kind of say you know Walmart might be a great company but you can only get so excited about same store sales. So you do need some kind of narrative as you mentioned to get people interested where the stock can really start to go on a run perhaps even more than it deserves based on the fundamentals or any data that's coming out. >> So you brought us another chart which is not like the other ones that we discussed so far. Oracle certainly not a healthcare company. This piqued my interest because I've been sitting in short call spread here in Oracle for some time just letting this thing suffer and meander down here. uh you're showing a weekly chart with a big prior breakdown, a failed rally into resistance and now sitting amidst a damaged range here. Why include Oracle in this group today? >> So Oracle is a stock that I am extremely bearish on for fundamental reasons. To me, it is the canary in the coal mine of the AI bubble. uh we may be a bit early before this is ready to pop but uh Oracle has some very very serious problems unless everything goes perfectly for OpenAI which is its its main customer for its data centers but looking at the chart from a technical basis it's it's really starting to run into some trouble right around this 135 area if that breaks down you've got very important support just below 120 and after that it's you know it's it's bar the door KD because this stock had really run into some problems. And if you look, you know, really just going back a year, say from that that August or September high, you know, you could show this chart to a 10-year-old and say, "Which way is this stock going?" And they'll probably tell you down. So, uh, this, you know, we've got two important levels of support coming up. They very well may hold, but if they don't, this stock is in very, very serious trouble on a technical basis. And as I mentioned, I think from a fundamental basis, uh, you know, a year or two out, uh, the Oracle is is in deep, deep trouble and and will be, if not the poster child for the AI bubble, it will be one of the companies that we're all talking about in 2030, 2032, whenever the the wreckage of the AI bubble has finally settled. I think Oracle is going to be that company everybody's talking about. >> So, when I'm looking across these charts, it all seems kind of similar. then you know there's a big move. Do you trust continuation? Do you wait for a reset? What's the common takeaway here for folks listening in when they go from biotech over to a name like Oracle? >> Well, I think it's really using those supports and resistances as key areas. So, waiting for those breakouts or breakdowns. You know, I don't think you ever want to try to anticipate that breakout or breakdown because, you know, stocks can can kind of bounce along those levels for quite some time. So, you you don't want to get ahead of that. you'll you'll pay a little bit more, no doubt about it, but the odds that you're going to be right are going to be significantly higher because basically all that that breakdown or breakout of a support and resistance is is a, you know, a graphical representation of some kind of psychological change in the market regarding that stock. Something has changed. You know, for whatever reason, if a stock is having trouble breaking through $100 a share and then suddenly it does, that tells you that you buyers are now in control. something has changed here. And so I always like to wait for evidence that that something has changed rather than anticipate that it will. >> Well, there you have it. Mark Litenfeld of the Oxford Group back for round two here on Trading Trends. Hopefully we'll get him back in a few weeks time to check back in on some of these charts and quite frankly see if uh the AI bubble continues to build out. Mark, thanks again for joining us here. >> Thank you. >> You've been watching Trading Trends. Make sure you like and subscribe for more videos. Thanks for watching Tasty Live.